Chinese Government Plans to Impose New Restrictions on Online Gaming Industry
China announced this Friday a plan to impose new restrictions on the online gaming industry in an effort to combat addiction. The news has had a significant impact on the technology sector, with several giants experiencing falls in the stock market resulting in million-dollar losses.
The draft published online by the Chinese regulator aims to limit the purchases that a player can make to improve their performance. This is part of a broader effort to combat compulsive behaviors in a country that is the world‘s largest market in the gaming sector.
China had previously imposed restrictions on the video game sector in 2021, setting limits on the time minors can spend in an online game. This move is part of a larger campaign to regulate technology giants.
The newly announced plan imposes limits on the recharges that a user can make in a game wallet, eliminates functions aimed at increasing the time of use of an application, and rewards those who connect daily. Additionally, authorities want to introduce pop-ups that warn users about “irrational” behavior.
The announcement has generated nervousness among investors, leading to a significant drop in the Hang Seng index, which measures the fluctuations of the largest companies listed on the Hong Kong stock exchange. Technology giant Tencent, the world‘s leader in the gaming sector in terms of revenue, saw its shares fall by 12.4%.
Tencent shares plummeted by 15% during the session, resulting in a market capitalization loss of over $54 billion. NetEase and XD shares also experienced significant decreases in value.
Michael Brown, a market analyst at Pepperstone, noted, “The clear signal is that the repression of the technology sector continues, and this offensive may be becoming more aggressive.”
In addition to the restrictions on the gaming sector, the draft also reiterates the prohibition of content that endangers national unity, poses a threat to national security, or harms national reputation and interests.
Since 2021, China has imposed limits on the time minors can play games during the school year, with those under 18 years of age only allowed to play between 8:00 p.m. and 9:00 p.m. on Fridays, Saturdays, and Sundays.
It is believed that this new measure may be motivated to direct consumer spending towards other sectors, particularly at a time of economic slowdown. Another objective could be to encourage young people to look for work, as the unemployment rate in the group between 16 and 24 years old reached a record of 21.3%, according to the latest official data published in June.